Delaware Corporation FAQ — Straight Answers to Common Questions

What do I need to form a Delaware corporation?

Four things: a distinguishable corporate name with a proper designator, a Delaware registered agent with a registered office in the state, a decision on how many shares to authorize (and their par value), and an incorporator to file. You submit the Certificate of Incorporation to the Delaware Division of Corporations. You do not need to live in Delaware, name your directors in the filing, or describe your business in detail.

Do I have to live in Delaware?

No. Delaware places no residency requirement on shareholders, directors, officers, or the incorporator. The only in-state requirement is a registered agent maintaining a Delaware registered office. Most Delaware corporations are run entirely from other states or from abroad.

How long does formation take?

Standard online processing runs about ten business days. Delaware offers expedited tiers — same-day, 24-hour, and even one- and two-hour service — for additional state fees when you have a deadline. Once the Division processes the Certificate of Incorporation, the corporation exists and the stamped filing is available.

What's the difference between the Certificate of Incorporation and the Articles of Incorporation?

They're the same document under different names. Delaware calls its formation filing the "Certificate of Incorporation," while many other states call the equivalent document the "Articles of Incorporation." Both create the corporation with the state.

Why do so many companies incorporate in Delaware?

Delaware offers three things together that no other state matches: the most developed corporate statute in the country (the Delaware General Corporation Law), a specialized business court (the Court of Chancery) that decides disputes quickly and consistently without a jury, and a high-volume filing office with fast expedited options. Investors and underwriters recognize a Delaware corporation instantly, which is why so many venture financings and IPOs assume one.

Should a small business incorporate in Delaware?

Often not. Delaware's advantages compound for companies raising outside capital or issuing stock widely. A small local business with no such plans frequently does just as well incorporating in its home state — where it avoids paying for a Delaware registered agent and, if it operates in its home state, avoids registering as a foreign corporation in two places. The Delaware premium earns its keep when your structure will face outside scrutiny.

If I incorporate in Delaware but operate elsewhere, do I file in two states?

Usually yes. A Delaware corporation actually doing business in another state generally must register there as a foreign corporation and maintain a registered agent in that state too — two sets of filings, two agents, and potentially two annual obligations. Factor that in before choosing Delaware for a business that's really based somewhere else.

Corporation or LLC in Delaware?

Both give liability protection. A corporation has a formal structure — shareholders own it, a board oversees it, officers run it, bylaws govern it — that investors recognize and that suits companies planning to issue stock. An LLC is simpler internally, with fewer required formalities. Founders raising venture capital almost always choose the corporation, because the venture financing framework is built around Delaware C corporations.

What does it cost to keep a Delaware corporation?

Two recurring pieces from the state: the annual franchise tax and the annual report, both due March 1. Add whatever your registered agent arrangement runs — commercial agents in the market typically bill yearly for the role, though with Mainstay the agent and the annual-report filing are folded into a single flat yearly service rather than billed apart. The state filing fees and franchise tax amounts are set by Delaware and shown on our cost pages via the receipt card.

What is the Delaware franchise tax?

It's an annual fee for the privilege of being a Delaware corporation — not an income tax. Delaware calculates it two ways: an authorized shares method keyed to how many shares you're authorized to issue, and an assumed par value capital method based on your issued shares and total gross assets. You can pay whichever produces the lower amount. For a startup that authorized a large number of shares, the first method can produce a shocking bill, while the second is usually far smaller — which is why understanding both methods matters.

Why did I get a huge franchise tax bill?

Almost always because you authorized a large number of shares and the notice used the authorized shares method. The fix is usually to recalculate under the assumed par value capital method, which for most startups with modest assets produces a dramatically smaller number. Delaware lets you pay the lower of the two. This surprise is common enough that it's practically a rite of passage for first-time Delaware founders.

Does Delaware tax my corporation's income?

Delaware does not impose corporate income tax on corporations that don't do business in the state — a reason holding companies favor it. If your corporation actually operates in Delaware, it's subject to Delaware business taxes. Either way, the franchise tax is separate and applies to every Delaware corporation regardless of where it operates.

What is the annual report and when is it due?

Every Delaware corporation files an annual report and pays franchise tax by March 1. The report updates the corporation's information — principal office, directors, officers — with the Division of Corporations. The notice goes to your registered agent, which is exactly why out-of-state owners miss it if their agent doesn't forward reliably.

What happens if I miss the March 1 deadline?

Delaware assesses a penalty plus interest on unpaid franchise tax. A corporation that continues to neglect the report and tax eventually falls out of good standing and, if it goes long enough, can have its charter declared void. Reviving a void corporation means paying all back tax, penalties, and a reinstatement fee — far more than filing on time.

Does a Delaware corporation need bylaws?

Yes. Bylaws are the internal governing document — the corporate equivalent of an LLC's operating agreement — adopted at the organizational meeting after formation. They aren't filed with the state, but they define how directors and officers are chosen and how meetings and votes work, and they're part of the formalities that protect your liability shield.

Do I need a registered agent for the whole life of the corporation?

Yes. Delaware requires a registered agent continuously, without lapse. A gap puts the corporation out of compliance and can leave it unable to receive service of process or state notices. If your agent resigns or you want to switch, name a replacement first and file the change so there's never a gap.

Can I dissolve a Delaware corporation if I'm done with it?

Yes, but you have to do it deliberately — walking away doesn't end it. You file a Certificate of Dissolution with the Division of Corporations, and Delaware generally requires franchise taxes to be current through dissolution. Formally dissolving stops the franchise tax clock; abandoning the corporation just lets tax and penalties pile up until the state voids it. See the dissolve page for the steps.